China Petroleum & Chemical Corp (Sinopec) is in talks with SK Corp, South Korea's largest oil refiner, about potentially investing in the planned initial public offering of its refining unit SK Incheon, an official at SK said.

According to the Korean company, the talks are part of wider negotiations on co-operation between the two companies, which already have dealings.

Asia's largest refiner, Sinopec is mostly focused on developing in its home market. A company official said talks were still at an initial stage.

'SK is looking for some sort of shares swap to foster a closer partnership ... the idea of inviting Sinopec to invest in Incheon is not purely considered from an economic point of view,' the SK official said.

Trying to expand beyond its mature home market, SK last week signed a letter of intent with Sinopec to form a joint venture to build a 14.7 billion yuan petrochemical plant in Wuhan, Hubei province, the first project of such a large scale in central China, Bloomberg quoted Xinhua-run China Oil, Gas & Petrochemicals magazine as having reported.

Sinochem Corp, China's largest oil trader had tried to buy the 91 per cent stake in the struggling Incheon refinery in late 2005, but was beat out by SK, which offered about US$3 billion in equity and debt.

SK planned to spin off the operation in Seoul and London last year, but postponed the offering citing 'under-performance' of the Korean stock market and appreciation of the Korean won, after an 11th-hour disagreement over the refinery's valuation with the deal's arrangers.

SK's spokeswoman said it had no immediate plan to sell Incheon shares to Sinopec. A Sinopec spokesman said he was unaware of the talks.